It is a dark path to argue that the people should not have a say in a democratic society, however, I do believe an issue as complex as EU membership is not something an uninformed public should have voted on. I became increasingly frustrated by both camps' attempts to educate the public on the two key areas of ignorance - immigration and sovereignty.
Before I turn to these two often misunderstood areas, I decided to give the blog some balance for all the Brexiters who have genuine economic and political angst. For me the best argument for leaving the EU has been a clear lack of ability to progress and reform, more so at a Eurozone than EU level. The clearest signs of this are in the Greek bailout package which shows the EU's method of kicking the can down the road rather than tackling issues head on. The inability to apply common sense led to a continued "extend and pretend" strategy. Whilst the European commission did not penalise Spain or Portugal for missing its deficit targets, the continued push for specific budget targets and the continual failure to meet them not only undermines the EC's credibility but also shows their lack of adaptability in allowing rules to evolve.
That said, a lot of these arguments focus on the Eurozone and whilst I sympathise with some of them, I believe Europe has come a long way since the creation of the EU. The UK should be at the heart of the next 40 years of progress, not distinctly in the background. To think that the biggest issue that these once warring nations now fight over is the correct degree of monetary policy says a lot. I fear that Brexit is the first step in a major move backwards for the European nations that goes way beyond economics.
Migration
By far the most misunderstood issue in the referendum was migration. Whilst there are justifiable reasons to want controlled and manageable migration, the EU referendum should not have been a vote on migration. Unfortunately, for many, a vote to leave was in their mind a vote on limiting EU migration. For the even less informed, it was a vote on limiting migration from everywhere (Syria and beyond), a blanket anti-migration protest. Whilst I understand many have valid economic reasons for wanting less or managed EU migration (a point I hope I will valiantly argue against), the referendum is far more than a migration debate.
First of all, let's put EU migration into context. Last year, the UK saw net EU inward migration of 184,000 people. That is less than 0.5% of our population. The UK actually saw slightly more net migration from the rest of the world (188,000 people). We have roughly 3 million EU citizens living in the UK and 1 million Brits live in the EU abroad. Germany saw 1 million refugees enter their country last year alone as the they fled war zones. So the first point is that the UK does not have an overwhelming migration problem from the EU.
My second point is the "lump fallacy". People believe their is a fixed number of jobs and if migrants take them then there is less for domestic citizens. That simply is not good economics. Migration can create industries and jobs along with new competitive advantages. It can complement the existing workforce rather than act as a substitute.
With everything, there are always the bad apples and I often hear anecdote after anecdote of a migrant abusing the system. Whilst I understand they do exist and that some rules could be improved, it has been proven time and time again that migrants add more to the UK pot economically in taxes, national insurance, technology, ideas, health care (and many more) than they take out in benefits or cheating the system. In fact the OECD estimated that half of the UK's economic growth is due to immigration alone since 2005. There is very little evidence that points otherwise. Furthermore, the UK and the US are ageing societies. A key reason Japan has failed to grow in the last two decades is a lack of immigration. As the country ages and the elderly become a bigger burden on society, immigration can help fill the gap. In Japan, the ageing population continue to work later and later into their lives. Perhaps why 73% of young people decided to vote remain.
The myth that migrants reduce jobs, reduce wages and are a burden on society simply is not true in the UK. If anything we need more migration. EU migration often fills skill shortages, improves efficiency and productivity in areas where UK citizens are unwilling to work for the going competitive rate.
What about security? The UK does police its own borders. Whilst they must accept free movement of labour they can still turn away threats to its security. In fact the UK has turned away 6000 EU nationals since 2010. Whilst I do not believe sharing of intelligence will stop after the UK leaves the EU, I do not see how leaving the EU will help prevent threats. That argument is highly illogical to me.
Putting all of this aside, even if migrants were net negative, how much are we going to reduce it anyway? After all the UK saw more non EU net migration last year. The idea of cherry picking the "right" migrants is another absurdity for a different blog. I will say one thing on this though. You cannot know now what industry the UK will develop a comparative advantage in and often migration is the very thing that determines this advantage. It need not be above a certain skill level or a particular profession and I dislike the arrogance of knowing the future that this argument entails. Furthermore, lacking certain skill sets or industries whilst focusing on your strengths is the entire foundation of the gains from trade. Ultimately I have not heard a strong economic reason for less or managed EU migration given its current scale. Ultimately I wish for a world of acceptance and embracing other cultures, where your race, creed or colour should not prevent you from pursuing your dreams abroad. Whilst I realise these dreams are naive, it is worrying to see the world going backwards on globalisation instead. All too often people blame foreigners for their problems, and I fear this time it is no different for many that voted.
Sovereignty
Perhaps just as frustrating as the migration debate is the idea that we are regaining our
sovereignty, the idea being the UK is "no longer governed by the unelected European officials". In fact, the OECD concluded that the UK has the least regulated labour and second least regulated product market in Europe.
sovereignty, the idea being the UK is "no longer governed by the unelected European officials". In fact, the OECD concluded that the UK has the least regulated labour and second least regulated product market in Europe.
Whilst some areas of the EU could and probably should be reformed, it is not unelected. The council is formed by the representative elected national governments and the European parliament is elected by the public. Given the low turnout at European elections, I find it ironic that this is one of the key arguments.
As for being governed abroad, the U.K. has voted against EU legislation 57 times, abstained 70 times and voted for 2,474 times. Whilst not all legislation is equal in importance, this clearly shows that the UK is not being governed abroad. In fact the UK has lost 2% of times and the most restrictive regulations tend to be created domestically. Whilst clearly the UK can be out-voted on many issues, it rarely has, and I see no problems with democracy acted across nations and not just domestically, in fact I embrace it.
As for trading sovereignty, the U.K.'s 1400 treaties with the UN, NATO, the WTO and the like are no different. You often agree bilaterally or multilaterally on legislation. This is not a bad thing. To be sovereign in the context of only having domestic laws is to be the most inward looking nation in the world. By this notion, I guess North Korea is the most "sovereign" nation in the world.
So what next?
Economically nobody knows. There are a range of estimates on the effects but I see no point in trying to put a number on it. It is an unknown.
In the short term, uncertainty will rule both in the UK and Europe. In the long run, camps are divided and the outcome does fully depend on what type of deal the UK gets.
However, the idea that the UK will retain all of its benefits without any of the costs is nonsense. So is the idea that the EU has as much to lose as the UK. 10% of the EU's exports go to the UK and 50% of the UK's exports go to the EU. The UK also relies heavily on foreign investment from the EU. So in effect, not only does the UK export a large share of its services to the EU but the EU partly funds the UK's successive current account deficits.
A lot of people cite the Norway or Swiss deal. But let's remember that both Norway and Switzerland accept free movement of labour. In fact Norway pay fees almost equivalent to the fee per head in the UK. The only thing Norway do not have is the ability influence the legislation that it must abide by. If anything, Norway is the perfect example of giving up sovereignty for free trade. Switzerland do not have free trade in services, which is the key export from the UK to Europe. Canada's free trade deal took seven years to agree and once again covers very few services. The UK also has to renegotiate thousands of trade deals piggybacked via the EU with 50 countries around the world as well as the ones currently in negotiation, from a much weaker position on its own.
There is no great trade deal in my opinion without paying into the EU budget, accepting EU laws and accepting movement of labour or at least some combination of these. The EU will not intentionally sabotage its relationship with the UK (unlike the UK has just done) however they will want to show the rest of Europe that the grass is not greener on the other side. Negotiating in their own self interest, it is absurd to suggest that EU will offer all the benefits without any of the costs. The UK is not in a position of power.
In the long term, I see a UK with a much lower potential growth rate, lower productivity and investment, increasing burdens from an ageing society with increasing investor concerns over the UK's twin deficit (budget and current account). Furthermore the backward looking "Little England" mentality goes way further than economics. As the country isolates itself from the world, the spread of technology, ideas, cultures and mutual acceptance of others will fade.
We won't have a counterfactual and it would not be fair to attribute everything bad that follows (or good) to leaving the EU. If I get hit by a bus tomorrow, it probably is not because we left the EU. Perhaps there are some positives to leaving that I have not considered, perhaps I am wrong. I hope I am. But everything I have learnt and believe in says this is one of the most disastrous decisions in postwar politics. The most frustrating part of it all is that the often cited migration and sovereignty issues have been so clearly misunderstood.
